Co-operators insurance has cut the cost of car insurance by an average of $200 per car in the Toronto area, but whether the good news will spread is unknown.

Auto insurance claims have dropped in the GTA, leading at least one company to lower their premiums.

Published on Sun Dec 16 2012

A major insurer has cut the annual cost of car insurance by an average of $200 per car in the Toronto area, but whether the good news will spread is unknown for now.

Co-operators Group of Guelph has reacted in a bold fashion to a dramatic decline in accident injury claims during 2011, by giving drivers in some Toronto neighbourhoods reductions as high as 34 per cent.

But other insurers are being more cautious. They are awaiting the outcome of a massive backlog of disputes about bills and benefits for mainly minor injuries, a new definition of catastrophic injuries, and the impact of new recommendations for fighting fraud.

“I don’t think there is any dispute that the frequency and cost of injury claims has gone down,” says veteran actuary James Christie. “But insurers will be wondering: Is this the new norm, or a one-time aberration?”

“Rate changes in Ontario are awkward to do. It takes six to nine months (to get approval from regulators). So companies are reluctant to drop rates if they might have to raise them again soon.”

Insurers were blind-sided in 2009 and 2010 when the number of injuries reported in and around Toronto rose wildly out of line with both the number of collisions and the rest of the province.

Now they are reserving judgment on a report by the General Insurance Statistical Agency that injury claims fell by 11,925, or 28 per cent, in 2011. The agency estimated there were would be savings of nearly $1.6 billion or $842 per private vehicle.

Nothing like this was seen in the rest the province. There, the total cost of injury benefits has been relatively stable. By GISA estimates, costs there were about $200 less per car outside of the Toronto area during 2011.

This year the average cost of insurance fell across the province by only 0.28 per cent, according to the Financial Services Commission of Ontario. But FSCO does not report separate results for the Toronto region.

“There is no question we are seeing a decrease (in the frequency of claims) from 2010 to 2012,” says Brian Kirkconnell, national claims director for Co-operators.

“We have taken a total of four (premium) decreases across 2012,” adds his colleague Mark Feeney, a regional vice-president, noting reductions were larger in the Toronto area.

Holding the line on premiums is State Farm Mutual Automobile Insurance Co. The earlier bulge in injury claims stung State Farm the worst. It is the only insurer dedicated exclusively to auto insurance. It lost $1.83 billion from 2009 to 2011 before finally turning profitable this year.

Chief executive Charles Brindamour told stock analysts recently that his company’s earnings are healthy, but “a number of industry players continue to be in a loss position.”

“Political changes in Ontario and the prorogation of the legislature creates uncertainty as to the timing of upcoming changes such as that of the definition of catastrophic impairment and other proposed measures from the (Ontario Auto Insurance) Anti-Fraud Task Force,” he added.

“Given the uncertainty around these changes and the improvement in the industry’s results, we can expect industry premiums in Ontario to be up in the low single-digit range in 2013.”

The price changes at Co-operators were not uniform across Ontario, or within the Toronto area. The average decline was $150 a car in Toronto, and $200 in nearby municipalities, the company told the Star.

Premiums were cut by only 2 per cent in certain low-income suburbs, but as much as 34 per cent in richer neighbourhoods, where more families have two cars, additional insurance benefits, and fewer minor injury claims.

Industry-wide figures for 2011 reveal that residents of Toronto, Mississauga, Brampton, Vaughan, Richmond Hill and Markham paid an average premium of $2,001 to insure a personal vehicle.

In other districts, residents were already paying much lower premiums: $1,523 per car in the Halton to Hamilton area, $1,476 in and around London, $1,374 from Brantford to Waterloo, $1,142 around Ottawa and $1,093 from Peterborough to Kingston.

Karin Ots, senior vice-president for regulatory and government affairs at Aviva Canada, says insurers face uncertainty due to a mix of government action and inaction.

Ontario introduced new rules, definitions, and language in relation to benefits for minor injuries in September, 2010. It limited payments for supplementary treatment and assessment of minor injuries at $3,5000. It let motorists buy less coverage for more serious injuries, and drop coverage for help around the home. Most have done so. Regulators also encouraged insurers to reject unreasonable claims.

Before and after these changes, thousands of claimants — or the clinics they visited — applied to the Financial Services Commission of Ontario for mediation to resolve disputes with insurers.

At one point, the backlog of disputes reached 36,000, compared with about 67,500 injury claims in all of Ontario last year. There are still more than 20,000 disputes unresolved, consultant and former FSCO employee Willie Handler has learned.

“I think it has really been a case of more disputes than the system can handle,” said Ots. “FSCO was not nimble at adding resources, and there were a number of underlying issues (such as an increase in fraud and questionable billing practices of clinics) that caused the number of disputes to go up,” she added.

The Ontario Court of Appeal ruled late in November that anyone whose dispute is not mediated within 60 days may choose a more costly forum: arbitration before the Financial Services Commission of Ontario or the courts. “This decision has the potential to add significant costs,” said Ots.

FSCO has warned that the wait time for arbitration is already six to eight months, while the pace of mediations is speeding up. An external firm, ADR Chambers, is handling 2,000 additional mediations per month.

Ots said there is also uncertainty about future costs after two court rulings awarded million-dollar benefits to a man and a woman who each reported psychological consequences after leg injuries that were severe, but not regarded previously as being eligible for catastrophic injury benefits.

Ots said she was encouraged, however, that the Ontario Auto Insurance Anti-Fraud Task Force urged the government to regulate the entire auto insurance marketplace, including the business practices of rehabilitation clinics, assessment providers, and tow truck operators.

In addition, FSCO is to undertake a two-year study into limiting the treatment of injuries to techniques supported by scientific evidence.

More on thestar.com

We value respectful and thoughtful discussion. Readers are encouraged to flag comments that fail to meet the standards outlined in our
Community Code of Conduct.
For further information, including our legal guidelines, please see our full website
Terms and Conditions.